A Tale of Two Perspectives: Regulation Versus Self-Regulation. A Financial Reporting Approach (from Sarbanes–Oxley) for Research Ethics

Reports of research fraud have raised concerns about research integrity similar to concerns raised about financial accounting fraud. We propose a departure from self-regulation in that researchers adopt the financial accounting approach in establishing trust through an external validation process, in addition to the reporting entities and the regulatory agencies. The general conceptual framework for reviewing financial reports, utilizes external auditors who are certified and objective in using established standards to provide an opinion on the financial reports. These standards have become both broader in scope and increasingly specific as to what information is reported and the methodologies to be employed. We believe that the financial reporting overhaul encompassed in the US Sarbanes?COxley Act of 2002, which aims at preventing accounting fraud, can be applied to scientific research in 4 ways. First, Sarbanes?COxley requires corporations to have a complete set of internal accounting controls. Research organizations should use appropriate sampling techniques and audit research projects for conformity with the initial research protocols. Second, corporations are required to have the chief financial officer certify the accuracy of their financial statements. In a similar way, each research organization should have their vice-president of research (or equivalent) certify the research integrity of their research activities. In contrast, the primary responsibility of the existing Research Integrity Officers is to handle allegations of research misconduct, an after-the-fact activity. Third, generally accepted auditing standards specify the appropriate procedures for external review of a corporation??s financial statements. For similar reasons, the research review process would also require corresponding external auditing standards. Finally, these new requirements would be implemented in stages, with the largest 14 research organizations that receive 25% of the total National Institutes of Health funding, adopting these research oversight enhancements first.     

Diagnostic hypothesis generation and human judgment

Diagnostic hypothesis-generation processes are ubiquitous in human reasoning. For example, clinicians generate disease hypotheses to explain symptoms and help guide treatment, auditors generate hypotheses for identifying sources of accounting errors, and laypeople generate hypotheses to explain patterns of information (i.e., data) in the environment. The authors introduce a general model of human judgment aimed at describing how people generate hypotheses from memory and how these hypotheses serve as the basis of probability judgment and hypothesis testing. In 3 simulation studies, the authors illustrate the properties of the model, as well as its applicability to explaining several common findings in judgment and decision making, including how errors and biases in hypothesis generation can cascade into errors and biases in judgment.     

Reward Systems,Moral Reasoning,and Internal Auditors’ Reporting Wrongdoing

This study investigates the issue of whistle-blowing behavior that results from internal auditors discovering company wrongdoing in the process of preparing financial information. An experiment was conducted to examine whether reward systems such as cash incentives or employment contracts have an impact on auditors’ disclosing wrongdoing behavior. The results indicate that internal auditors are more likely to report wrongdoing to higher authorities when incentives are provided, suggesting reward systems have a positive effect on disclosing company’s wrongdoing or even fraud. In addition, the result reveals that internal auditors with lower levels of moral reasoning are more sensitive to cash incentives.     

Expertise and the explanation effect

The effect of professional experience on the “explanation effect”, i.e., generation of an explanation for an event occurrence increasing the judged likelihood of the event, is investigated in a risk assessment (financial auditing) context. An explanation effect was predicted for inexperienced auditors (auditing students); however, audit judgment experience was predicted to mediate, or eliminate, any explanation effect. Two competing hypotheses for the origin of the effect, the causal construction and recall-availability hypotheses, are tested given the presence of antecedent conditions for, and against, the explanation events. Audit risk judgments were provided by 58 novice and 42 experienced auditors. Written explanation for occurrence of the target event resulted in the explanation effect for novice subjects, both for specifie event and aggregate risk assessments. The pattern of results supported the recallavailability over the causal construction hypothesis. The judgments of the experienced auditors, however, did not indicate any explanation effect.     

Magician accuses faith healers of hoax

Discussions of faith healing have traditionally focused on the persuasiveness of the healer and the receptivity of the audience. Recently magician James Randi investigated popular American faith healers and accused them of deliberate fraud. The deceptions he identified are those used for many years by fraudulent mediums and psychics. This paper reviews the history of conflict between charlatans and magicians, providing a context for understanding the findings of Randi.     

That’s Not Science! The Role of Moral Philosophy in the Science/Non-science Divide

The science/non-science distinction has become increasingly blurred. This paper investigates whether recent cases of fraud in science can shed light on the distinction. First, it investigates whether there is an absolute distinction between science and non-science with respect to fraud, and in particular with regards to manipulation and fabrication of data. Finding that it is very hard to make such a distinction leads to the second step: scrutinizing whether there is a normative distinction between science and non-science. This is done by investigating one of the recent internationally famous frauds in science, the Sudbø case. This case demonstrates that moral norms are not only needed to regulate science because of its special characteristics, such as its potential for harm, but moral norms give science its special characteristics. Hence, moral norms are crucial in differentiating science from non-science. Although this does not mean that ethics can save the life of science, it can play a significant role in its resuscitation.     

Private Investigations of White‐Collar Crime Suspicions: A Qualitative Study of the Blame Game Hypothesis

The activity of private investigations by fraud examiners is a business of lawyers, auditors, and other professionals who investigate suspicions of financial crime by white‐collar criminals. This paper presents results from an empirical study of investigation reports. The available sample consists of 28 reports written mostly by auditing firms such as Deloitte, Ernst & Young, and PwC. The blame game can occur at two stages in a private investigation. First, the mandate formulated by a client may point investigators in a specific direction. Next, investigators sometimes suffer from a tunnel view of predetermined opinions. In the sample of 28 investigations reports, more than half of them involve potential blame game victims. Copyright © 2014 John Wiley & Sons, Ltd.     

Ignorance or integration: the cognitive processes underlying choice behavior

The fast‐and‐frugal heuristic framework assumes noncompensatory tools for human preferences (i.e., priority heuristic) and inferences (i.e., take the best heuristic). According to this framework, these heuristics predict choice behavior as well as model the cognitive processes underlying such behavior. The current paper presents two studies that juxtapose predictions derived from these two simple heuristics with alternative predictions derived from compensatory principles. Dependent measures that included reaction time, choice pattern, confidence level, and accuracy were better predicted by compensatory indices than by noncompensatory indices. These findings suggest that people do not rely on limited arguments only, but tend to integrate all acquired information into their choice processes. This tendency was replicated even when the experimental task facilitated the use of noncompensatory principles. We argue that the fast and frugal heuristics can predict the final outcome only under certain conditions, but even in these particular situations they are not applicable to the processes underlying choice behavior. An integrative model for choice behavior is proposed that better represents the data. Copyright © 2009 John Wiley & Sons, Ltd.     

No trust on the left side: Hemifacial asymmetries for trustworthiness and emotional expressions

People can discriminate cheaters from cooperators by their appearance. However, successful cheater detection can be thwarted by a posed smile, which cheaters display with greater emotional intensity than cooperators. The present study investigated the underlying neural and cognitive mechanisms of a posed smile, which cheaters use to conceal their anti-social attitude, in terms of hemifacial asymmetries of emotional expressions. Raters (50 women and 50 men) performed trustworthiness judgments on composite faces of cheaters and cooperators, operationally defined by the number of deceptions in an economic game. The left–left composites of cheaters were judged to be more trustworthy than the right–right composites when the models posed a happy expression. This left-hemiface advantage for the happy expression was not observed for cooperators. In addition, the left-hemiface advantage of cheaters disappeared for the angry expression. These results suggest that cheaters used the left hemiface, which is connected to the emotional side of the brain (i.e., the right hemisphere), more effectively than the right hemiface to conceal their anti-social attitude.     

Detection costs and contingent attentional capture

Peripheral cues reduce reaction times (RTs) to targets at the cued location with short cue-target SOAs (cueing benefits) but increase RTs at long SOAs (cueing costs or inhibition of return). In detection tasks, cueing costs occur at shorter SOAs and are larger compared with identification tasks. To account for effects of task, detection cost theory claims that the integration of cue and target into an object file makes it more difficult to detect the target as a new event, which is the principal task-requirement in detection tasks. The integration of cue and target is expected to increase when cue and target are similar. We provided evidence for detection cost theory in the modified spatial cueing paradigm. Two types of cues (onset, color) were paired with two types of targets (onset, color) in separate blocks of trials. In the identification task, we found cueing benefits with matching (i.e., similar) cue-target pairs (onset-onset, color-color) and no cueing effects with nonmatching cue-target pairs (onset-color, color-onset), which replicates previous work. In the detection task, cueing effects with matching cues were reduced and even turned into cueing costs for onset cues with onset targets, suggesting that cue-target integration made it more difficult to detect targets at the cued location as new events. In contrast, the results for nonmatching cue-target pairs were not affected by task. Furthermore, the pattern of false alarms in the detection task provides a measure of similarity that may explain the size of cueing benefits and costs.     

How Resources (or Lack Thereof) Influence Advice Seeking on Psychological Well-being and Marital Risk: Testing Pathways of the Lack of Financial Stability,Support, and Strain

Using the model of conservation of resources (Hobfoll in The ecology of stress. Hempshire, New York, 1988; Hobfoll in Am Psychol 44:513–524, 1989; Hobfoll in Stress, culture, and community: the psychology and philosophy of stress. Plenum, New York, 1998; Hobfoll in Appl Psychol Int Rev 50:337–421, 2001), we explore how advice seeking, as influenced by lack of financial stability and support and strain from others (i.e., spouse, friends, and family) predicts psychological well-being and marital risk. Married and committed individuals (n = 1,798) were drawn from a nationally representative sample, the MIDUS. We found that advice seeking predicted psychological well-being and marital risk, but that the relationships depended on the availability of resources (i.e., financial stability, support, strain) and from whom support or strain was received. For example, for individuals lacking financial stability, marital risk decreased with advice seeking for those reporting high support from friends, whereas for individuals with financial stability, marital risk increased with advice seeking for those reporting high support from friends. We explain how understanding advice seeking and its outcomes must be considered within the context of available resources (or lack thereof).     

How (far) can rationality be naturalized?

The paper shows why and how an empirical study of fast-and-frugal heuristics can provide norms of good reasoning, and thus how (and how far) rationality can be naturalized. We explain the heuristics that humans often rely on in solving problems, for example, choosing investment strategies or apartments, placing bets in sports, or making library searches. We then show that heuristics can lead to judgments that are as accurate as or even more accurate than strategies that use more information and computation, including optimization methods. A standard way to defend the use of heuristics is by reference to accuracy-effort trade-offs. We take a different route, emphasizing ecological rationality (the relationship between cognitive heuristics and environment), and argue that in uncertain environments, more information and computation are not always better (the ??less-can-be-more?? doctrine). The resulting naturalism about rationality is thus normative because it not only describes what heuristics people use, but also in which specific environments one should rely on a heuristic in order to make better inferences. While we desist from claiming that the scope of ecological rationality is unlimited, we think it is of wide practical use.     

Mechanism Discovery and Design Explanation: Where Role Function Meets Biological Advantage Function

In the recent literature on explanation in biology, increasing attention is being paid to the connection between design explanation and mechanistic explanation, viz. the role of design principles and heuristics for mechanism discovery and mechanistic explanation. In this paper we extend the connection between design explanation and mechanism discovery by prizing apart two different types of design explanation and by elaborating novel heuristics that one specific type offers for mechanism discovery across species. We illustrate our claims in terms of two lines of biological research on the biological advantages of organismal traits, one on the eye-size of giant squid, the other on foraging habits of specific bat species. We argue that this research illustrates useful heuristics for mechanism discovery across species, viz. reasoning strategies to infer likely mechanisms for a certain biological role based on assessments of the environmental conditions in which the role is performed efficiently (i.e., offers a biological advantage) and less or in-efficiently. We bring out the novel features of our analysis in terms of a comparison with mechanistic approaches to mechanism discovery, amongst which graph-theoretical ones, and by comparing the different types of design explanation and the discovery heuristics they support.     

Feigning Schizophrenic Disorders on the MMPI--2: Detection of Coached Simulators

The Minnesota Multiphasic Personality inventory (MMPI) and, more recently, its revised version (the MMPI-2) have represented the "gold standard" in the psychometric assessment of malingering and other response styles. In this study, we provide a stringent test of the MMPI-2 validity indices and their ability to detect feigned schizophrenia in four groups of simulators (n = 72). Simulators were randomly assigned to one of four conditions: (a) coached on symptoms of schizophrenia, (b) coached on strategies for the detection of fakers, (c) coached on both symptoms and strategies, or (d) uncoached. Simulators were compared to subjects responding under an honest condition (n = 13) and a comparison group of schizophrenic inpatients (n = 37). We found knowledge of strategies alone allowed many simulators (i.e., one third or more, depending on the validity indices) to elude detection, In contrast, knowledge of the disorder appeared less useful to simulators in avoiding detection. Coaching on both strategies and symptoms was not as effective as strategies alone. Consistent with previous studies, uncoached simulators were detected with moderately high Ievels of accuracy.     

The role of convexity in perception of symmetry and in visual short-term memory

Visual perception of shape is affected by coding of local convexities and concavities. For instance, a recent study reported that deviations from symmetry carried by convexities were easier to detect than deviations carried by concavities. We removed some confounds and extended this work from a detection of reflection of a contour (i.e., bilateral symmetry), to a detection of repetition of a contour (i.e., translational symmetry). We tested whether any convexity advantage is specific to bilateral symmetry in a two-interval (Experiment 1) and a single-interval (Experiment 2) detection task. In both, we found a convexity advantage only for repetition. When we removed the need to choose which region of the contour to monitor (Experiment 3) the effect disappeared. In a second series of studies, we again used shapes with multiple convex or concave features. Participants performed a change detection task in which only one of the features could change. We did not find any evidence that convexities are special in visual short-term memory, when the to-be-remembered features only changed shape (Experiment 4), when they changed shape and changed from concave to convex and vice versa (Experiment 5), or when these conditions were mixed (Experiment 6). We did find a small advantage for coding convexity as well as concavity over an isolated (and thus ambiguous) contour. The latter is consistent with the known effect of closure on processing of shape. We conclude that convexity plays a role in many perceptual tasks but that it does not have a basic encoding advantage over concavity.     

Reasons for Gaps in Crime Reporting: The Case of White-Collar Criminals Investigated by Private Fraud Examiners in Norway

Recent years have seen an increasing use of private internal investigations assessing financial irregularities that often imply economic crime. When fraud examiners discover evidence of white-collar crime, they often leave it to their clients whether the issue should be reported to the police. We examine the gaps in white-collar crime reporting after fraud examination and reasons behind such decisions. In Norway, non-reporting could be as high as 96%, as calculated in this article. We apply techniques of neutralization to private fraud examiners’ reasoning for non-reporting of suspected or detected white-collar crime. We also offer possible policy-based solutions to reduce the identified gaps in reporting.     

Financial product sensitivity predicts financial health

Recent research has aimed to understand how people consider financial decisions because they have important consequences for well-being. Yet existing research has largely failed to examine how attitudes and behaviors vary as a function of the specific financial product (e.g., debt type). We ask to what extent people differentiate between similarly categorized financial products (e.g., debt or investment) as a function of their terms (e.g., interest costs and expected returns) and whether such differentiation predicts financial health. Across four studies, we find not only that there are individual differences in attitudes toward similar financial products (e.g., two distinct loans), but also that the extent to which a consumer is averse to high-cost versus low-cost products predicts financial health. This relationship cannot be fully explained by financial literacy, numeracy, or intertemporal discounting. In addition, nudging people toward differentiating between financial products promotes decisions that are aligned with financial health.     

Punishing female negotiators for asserting too much…or not enough: Exploring why advocacy moderates backlash against assertive female negotiators

We complement prior findings that self-advocating female negotiators are reluctant to assert their interests and subsequently suffer financial repercussions, relative to other-advocating females, self-advocating males, and other-advocating males, by showing that self-advocating female negotiators who do assert their interests suffer negative social judgments (i.e., backlash). We use nascent theory on societal norms for the behavior of each gender to explain why advocacy context moderates backlash. We show that assertive, self-advocating women suffer a social backlash (for example, decreased likability) because their behavior is associated with high negative masculine and low positive feminine characterizations. Non-assertive, other-advocating women suffer a leadership backlash (for example, lower presumed competency) because their behavior is associated with high negative feminine and low positive masculine characterizations. Interestingly, male negotiators do not suffer any backlash consequences despite being characterized in a fashion similar to that of the females in each condition.     

Planning paths to multiple targets: memory involvement and planning heuristics in spatial problem solving

For large numbers of targets, path planning is a complex and computationally expensive task. Humans, however, usually solve such tasks quickly and efficiently. We present experiments studying human path planning performance and the cognitive processes and heuristics involved. Twenty-five places were arranged on a regular grid in a large room. Participants were repeatedly asked to solve traveling salesman problems (TSP), i.e., to find the shortest closed loop connecting a start location with multiple target locations. In Experiment 1, we tested whether humans employed the nearest neighbor (NN) strategy when solving the TSP. Results showed that subjects outperform the NN-strategy, suggesting that it is not sufficient to explain human route planning behavior. As a second possible strategy we tested a hierarchical planning heuristic in Experiment 2, demonstrating that participants first plan a coarse route on the region level that is refined during navigation. To test for the relevance of spatial working memory (SWM) and spatial long-term memory (LTM) for planning performance and the planning heuristics applied, we varied the memory demands between conditions in Experiment 2. In one condition the target locations were directly marked, such that no memory was required; a second condition required participants to memorize the target locations during path planning (SWM); in a third condition, additionally, the locations of targets had to retrieved from LTM (SWM and LTM). Results showed that navigation performance decreased with increasing memory demands while the dependence on the hierarchical planning heuristic increased.     

Educated and Happy: A Four-Year Study Explaining the Links Between Education,Job Fit,and Life Satisfaction

Drawing on a bottom-up theoretical perspective on life satisfaction, we developed and tested a model that specifies distinct paths from education to life satisfaction through three domain satisfactions (i.e., job, financial, and health satisfactions). Furthermore, we proposed explanatory mechanisms for each of these three paths (i.e., job fit, financial literacy, and proactive healthy behaviours). To test our hypotheses, we used a large probability sample comprising 3,011–9,669 individuals, from the Netherlands, who provided survey responses over four consecutive years. The results supported the hypothesised mediating mechanisms explaining the indirect relationship between education and job, financial, and health satisfactions. Findings also showed that each of these domain satisfactions independently predicts general life satisfaction. Overall, the study shows the importance of education for life satisfaction and highlights the importance of work (i.e., job fit and job satisfaction) for individuals' general subjective well-being.